Nestlé S.A.
Q4 2011 Earnings Call Transcript

Published: 16 Feb 2012

[Executives:]

James Singh – Chief Financial Officer Roddy Child-Villiers – Head, Investor Relations

[Analysts:]

Warren Ackerman – Société Générale Jon Cox – Kepler Capital Markets David H. Hayes – Nomura International Plc Simon J. Marshall-Lockyer – Jefferies International Ltd. Alain S. Oberhuber – MainFirst Schweiz AG Patrik Schwendimann – Zürcher Kantonalbank Pedro Gil – Santander Bank Jane Gelfand – Barclays Capital, Inc. Jeremy Fialko – Redburn Partners LLP Jeff Stent – Exane BNP Paribas Marco Gulpers – ING Financial Markets

[Operator:]

Good morning, ladies and gentlemen, and welcome to the Nestlé 2011 Full Year Results Conference Call hosted by James Singh, Chief Financial Officer and by Roddy Child-Villiers, Head of Investor Relations. As usual there will first the presentation then we will open the call for question-and-answer. My name is Jones and I will be your coordinator this morning. Throughout the conference, you will remain on listen-only. (Operator Instructions) I’d like to like to advise all parties, this conference is being recorded. And now I’d like to hand the conference over to Mr. Singh.

[James Singh:]

Good morning. Welcome to our full year results conference call. I will take the safe harbor as read and move to some introductory remarks. 2011 was a year of continued momentum in a particularly challenging environment. The focus of our discussion this morning will be on the continuing business, which is indicative of our performance following the sale of Alcon in August last year. Overall, our progress is aligned and coherent with the Nestlé Roadmap, which we have shared with you many times. This demonstrates that our Roadmap is as relevant as ever in today’s new reality to drive improved performance. Our growth drivers including

[Operator:]

[:]

[Warren Ackerman – Société Générale:]

Good morning Jim, good morning Roddy. Hi, Warren here at Soc Gen. Two questions. The first question is just on your performance in Europe. I think Nestlé is one of the few consumer companies seeing an improved performance in Europe in the fourth quarter by volume and pricing improving. And, obviously Jim, you mentioned innovation in your speech, there's a big reason behind that. But I was wondering maybe, you can maybe just outline some of the trends that you're seeing in the Western European markets, the food retail trends, the promotional trends, some of the kind of the macro drivers behind that improved performance in Europe? And then the second question, just looking at the cost of goods sold line; I was just wondering how you expect the COGS line to trend from here? And is it realistic to think it might be positive by the time we get to the second half of 2012? And as commodities stand today, what is your thoughts and guidance for 2012? Thank you.

[James Singh:]

Thank you, Warren. First of all, in Europe in general, particularly in Western Europe, Western Europe last year, all our large markets had good organic growth and good Real Internal Growth performance. I think the key to our progress and our continued progress in Europe is innovations, smaller innovations, large very impactful innovations. And over the last three years, we started about four years ago with an objective to have in Europe CHF 1 billion coming from innovations. And I could tell you that the end of last year, that number was CHF 1.2 billion, and it is the innovation that is really driving our performance in Europe. In addition to continue innovating and renovating around established brands like Maggi, in terms on the core proposition of those brands. So our active innovation program, very active efficiencies across the value chain, are really helping us to manage commodity cost inflation and the general competitive trade environment. Looking forward, I think innovation will continue to make a difference in Europe, but I don't necessarily see that the competitive trade environment will change materially. I think we will continue to see competitive intensity within the trade environment. And in the cost of goods sold, I would say that 2011 was a difficult year because we had a severe volatility at the start of the year. And we talked about this in the first half with the results, where we had the impact of cost coming in immediately in January and our price realization during the course of the year. I think next year, we're not going to have the 10%, 11% inflation. I think we're looking at low single-digit and yeah, there may be a correction at the gross margin. But as you know, we don't depend on gross margin as such. We have to manage our cost throughout the P&L to make sure that we don't rely only on pricing to deal with cost inflation and deliver margin growth. So I think we have a more moderate view in terms of what inflation commodities or input cost basket will be. I think there is going to be some volatility continuing. We started to see it already. But at peaks and the lows maybe lower, so we will have volatility, which will also help us to be better able to predict the trend of commodities during the course of the year.

[Warren Ackerman – Société Générale:]

Okay, Jim. Thank you very much.

[James Singh:]

You are welcome.

[Roddy Child-Villiers:]

I think also in terms of the Q4 trend in Europe, a lot of the improvement was down to the increased pricing particularly in Soluble Coffee, so again picking up on Jim's comment about raw material cost pressure, a lot of the improvement was down to pricing.

[Warren Ackerman – Société Générale:]

What kind of pricing have you taken, Roddy, in Coffee in Europe?

[Roddy Child-Villiers:]

I haven't got the precise percentage.

[Warren Ackerman – Société Générale:]

Right.

[Roddy Child-Villiers:]

But I mean we are up quite significantly.

[Warren Ackerman – Société Générale:]

Quite significantly.

[Roddy Child-Villiers:]

Yes.

[Warren Ackerman – Société Générale:]

Okay. Cheers guys thanks.

[Operator:]

Thank you for your question. Your next question comes from Jon Cox from Kepler. Please ask your question.

[Jon Cox – Kepler Capital Markets:]

Good morning James. Congratulations. I think the top line took some of us by surprise there, that organic growth acceleration in Q4. I have a question on that. Basically, in the Americas, you alluded to it somewhat, but there it appears that you accelerated by a couple of points in Q4. And I'm just wondering on the environment in North America specifically, are you seeing signs of an improvement there? That's my first question. Now, second question, just on this net debt getting to 15 to 18 by 2012, 2013, when I do the numbers excluding any M&A, you should just basically maintain in that level. Just wondering what I'm missing, particularly if you're looking to actually cap working capital as a proportion of sales. I'm wondering if you just give us a bit more clarity on that or are you including some maybe bolt-ons in that figure? Thank you.

[James Singh:]

Thanks, Jon. First of all in North America, I think the business picked up in the fourth quarter. We have seen coming into the fourth quarter some expectation that the consumer was becoming a little more confident towards the end of the year with the festivities, Thanksgiving and Christmas and so on. But putting that aside, I would say that the innovations in PetCare, PetCare had a very strong quarter based on the innovations that were launched during the first half. We also had reasonably good performance in Water. Nestlé Waters did fairly well, whereas the other businesses were more or less flat during the course of the year. So I would say that there are some bright spots in the U.S., but generally the North American economic environment will remain subdued for this year. That's the way we are seeing it, with some slight improvement. I think the macroeconomic numbers seem to point to a slow, but gradual improvement rather than more of the downside. So we are hopeful that this year, we will see a better performance in that part of the world. On the net debt, yeah, we do include some bolt-on. But we have talked about this before. I'm not going to give you a number because we'd respond to the opportunities in the marketplace. But in the normal course, I would say that our targets of CHF 15 billion to CHF 18 billion 2012, 2013, we're on track to achieve that. Last year, of course, we had the significant impact on our cash flows because of exchange. I do not think that we're going to see the same depths. You will note that since the Swiss Bank took action relative to the Euro in August last year, the Swiss franc has weakened considerably against many of the currencies around the world. So we hopefully will avoid that significant impact on currencies and our cash flow in 2012. So we feel very confident, that what we told you about 18 months ago, that we are on track to deliver those numbers.

[Roddy Child-Villiers:]

Just to cover the additions, Jon, I mean in North America it's worth pointing out that the non-Zone businesses – most of the non-zone businesses, so Waters, Professional, Nestlé Health Times, Nespresso were all accretive, all performed at a high level than the Zone North America businesses did. So the overall, Nestlé North America business was quite strong. And just a reminder on this expectation on net debt, this is not supposed to be some firm guidance number, it's just the expectations that we gave you when we got all the Alcon cash in. So don't worry about if you can't get it to the nearest billion, it's only an expectation.

[Jon Cox – Kepler Capital Markets:]

Okay, and Jim can I just say, all the best for your retirement and I hope you enjoy it. Thanks.

[James Singh:]

Thank you, Jon. Thank you very much.

[Operator:]

Thank you for your question. Your next question comes from David Hayes with Nomura, go ahead.

[David H. Hayes – Nomura International Plc:]

Gentlemen, just first on the marketing spend, obviously you talked about the improvement in efficiency allowing you to be slightly down on consumer-facing spend. I just wonder whether you can give a little bit of detail where there's an element of phasing or timing in that and that you get a bit of catch up in the first half 2012 or whether those efficiencies will continue and therefore, this is a new trend, a new theme, a new benefit for the numbers moving forward. Secondly, just on the cash flow, obviously you talked about the working capital in detail, but the variation and other assets and liabilities line, I see you still – a big outflow relative to history, about CHF 1.2 billion. I just wonder whether you can talk about the drivers there and whether again in 2012 that could reverse quite substantially. And then also a cheeky third question, I suspect there's a no comment, but obviously there's also reports about the Pfizer situation you being at the table for that situation. I just wonder whether you can confirm that you have got interest and what that might be and then if there's any timing outlook in terms of that deal potential coming to a head. Thank you very much.

[James Singh:]

Thanks, David. Well, I'll start with your last question because that's easy. I think you're absolutely right. We would not comment on what's happening at Pfizer. And on the marketing spend, yeah, I think the efficiencies and I do not want to discuss this in great detail because Paul is going to talk about this in London in a very focused way but essentially, what we are trying to do is to make sure that the money we spend have a greater impact directly with the consumer. And we are taking a very critical view of those expenses that don't. The other area is that we are changing the way we spend our marketing or media money with respect to the choice of media. And Paul, again, will talk about it. As you see, as I mentioned and our digital has gone up – it is now double-digit percentage of our total media spent and it itself has increased double digit. In addition to that, media spending, like every other area of operations is subject to NCE and we are looking at areas where we can get the greatest productivity of our spend. So, that is something that is going to continue. There is no need to change direction there because within Nestlé, we are looking to eliminate waste. It's one of the central features of Nestlé Continuous Excellence. On the cash flow, on the other assets and liabilities, I think these are basically the changes and provisions. Last year, we made a fair amount of provisions and this year, we spent a fair amount of that. So essentially those are numbers net of spending, I think the base, the comparable base was high, I think will be back to more normal levels during the course of 2012. Does that answer your question, David?

[David H. Hayes – Nomura International Plc:]

Yes. It’s just flatter rather than a reversal then on that last point that should be the assumption.

[James Singh:]

I think the base in 2011 is more or less a normalized base. We will have to see as the year progresses.

[David H. Hayes – Nomura International Plc:]

Okay, that’s perfect. Thank you very much. Cheers Jim, thank you.

[James Sigh:]

Thanks.

[Operator:]

Thank you for your question. Your next question is from Simon Marshall with Jefferies. Please ask your question.

[Simon J. Marshall-Lockyer – Jefferies International Ltd.:]

Yes, good morning gentlemen. Just a quick question on the machine-based offer, could you give us some sort of updates on NESTEA, BabyNes, some of the smaller offers at this point, Viaggi machine and the non-Nespresso sort of machine based offer at this point?

[James Singh:]

Okay, Roddy will respond to it.

[Roddy Child-Villiers:]

Yeah, good morning Simon. Thanks very much.

[Simon J. Marshall-Lockyer – Jefferies International Ltd.:]

Good morning.

[Roddy Child-Villiers:]

Well, I'll start with the big one I think. I can't ignore it. And Nespresso as we said has continued to perform very well, still double digit in its early markets and making great progress internationally. 2011 is the first year where we've gone over 15% of our Nespresso sales outside Europe. So the international, if you like international business is really building emphasis. Now going down in order of sales, Nestlé Dolce Gusto over 60% organic growth. It's in over 50 markets and continuing to take share. I think it took, I think from memory 360 basis points of share gain in 2011, so performing very well. Then we have professional machines. The premium machine is Milano. That's now in several thousand restaurants, so it's really starting to build some critical mass. Viaggi, obviously super premium, is as you would expect having a slower build but it's also meeting our – or even beating our expectations. Then Special.T, we are planning to increase the number of markets, where as present is doing very well. It did very well in 2011. BabyNes, it's still very, very early days, it’s only effectively six months on the market. But again, we're looking at opportunities for international expansion. It has been received extremely well by the mums and dads. So we're very pleased with that too. So we’re all getting very well, but I think you have to think about Viaggi and BabyNes as very much more niche offerings than the Nespresso or Special.T.

[Simon J. Marshall-Lockyer – Jefferies International Ltd.:]

Can you give any guidance on Special.T in terms of size of business at this point and number of markets it's in?

[Roddy Child-Villiers:]

Well, it's a very long way from being material. But I mean the growth is ahead of our expectations, but it is not a number we're going to disclose. It's just not material at this stage.

[Simon J. Marshall-Lockyer – Jefferies International Ltd.:]

Thank you.

[Roddy Child-Villiers:]

All right, thanks Simon.

[James Singh:]

I think, Simon, I want to let you know that both Nestlé Special.T and BabyNes are ahead of our targets that we set for the business going into last year.

[Roddy Child-Villiers:]

Next question, please.

[Operator:]

Thank you for your question. Your next question is from Alain Oberhuber. Please ask your question.

[Alain S. Oberhuber – MainFirst Schweiz AG:]

Hello good morning, two questions. The first is about Continuous Excellence program. Could you talk a little bit about what exactly is your plan for 2012? Could you see again CHF 1.5 billion of cost savings? The second question is about the margin development in the Americas. Was it the decline in Latin America similar to the Greek and if so was is primarily because of the input costs? And based on that, what could we expect on margin development for North as well as Latin America for 2012?

[James Singh:]

Thanks Alan. First of all NCE, I just want to make it clear that NCE is not only about cost savings. The cost savings surely is one of the outcomes of NCE as we focused on driving out waste and just doing things that matters. It is a program that is enabling us to change our mind set with respect to gaining throughout the value chain the most effective and efficient operation supported by business processes and system. So, it is about how, it’s about a mindset change focusing and driving out waste in the company. Now, I believe that in terms of a guidance for next year, we feel very comfortable that our savings plan which is significantly linked to NCE but our savings plan per se will continue to deliver total cost improvement of about CHF 1.5 billion. So that’s on NCE. On the margins in America, one thing we have to think about is that the currency impact on the group also impacts the businesses in the various parts of the world. And a lot of the impact there also has to do with price relative to cost from a margin point of view. Because as you know, you have to take more pricing than cost to maintain your margin, so the 30 basis points decline in trading operating profit was a combination of cost pressures on the business in that part of the world in addition to the weak U.S. dollar performance relative to the Swiss francs. But the other point is that, Latin America or Zone America as a whole, they also subscribe intensely to the Nestlé model. So we expect all our businesses, all our zones to deliver on the Nestlé model which is among other things, top line growth and bottom line improvements in constant currency.

[Alain S. Oberhuber – MainFirst Schweiz AG:]

Okay, thank you very much gentlemen. Also from my side all the best for your retirement.

[James Singh:]

Thank you, Alain. Thank you very much.

[Operator:]

Thank you for your question. Your next question comes from Patrik Schwendimann from ZKB. Please ask your question.

[Patrik Schwendimann – Zürcher Kantonalbank:]

Patrik Schwendimann from Zürcher Kantonalbank. Good morning Jim, good morning. Roddy, Firstly, regarding your strong finish in the organic growth which was more or less 8.1% in quarter four. Was anything extraordinary in there bearing in mind – what shall we expect for quarter one? Is this then a little bit lower than usual? That's my first question. And secondly, regarding pricing. You were mentioning raw material increases as low single digit, what does this mean in terms of your pricing for 2012? Could you give us here a best guess estimate? Thank you.

[James Singh:]

As Roddy indicated to an early question. I think part of the pickup in the fourth quarter was the increased realization of our pricing. And with the continued innovations of our brands, new business and new business models, we did not have any material impact on our RIG performance. So, our RIG performance held up pretty well and our pricing improved. So, that's basically the reason for a very a good fourth quarter. In terms of the outlook, I mean the outlook we said was, the organic growth this year again will be somewhere between 5% and 6%. So, I'm not in a position to give you any quarterly guidance Patrik, but I think that is our guidance for the year. I hope that answers your question.

[Roddy Child-Villiers:]

We can obviously have…

[Patrik Schwendimann:]

So there was no cannery impact, so we could expect that even in, could be evened up off to 5% to 6% in quarter one, after this strong quarter four?

[Zürcher Kantonalbank:]

So there was no cannery impact, so we could expect that even in, could be evened up off to 5% to 6% in quarter one, after this strong quarter four?

[James Singh:]

No, I would say that our guidance is 5% to 6% for the year. I don't see any reason to change that at this time Patrik.

[Patrik Schwendimann:]

Okay, thank you.

[Zürcher Kantonalbank:]

Okay, thank you.

[Roddy Child-Villiers:]

Well, Patrik, there are no specific one-offs in the final quarter and there are always timing differences. As an example, Chinese New Year is much later in 2013 than it was in 2012. There is always going to be different timing differences. The other thing to remember of course, is that the pricing we took accelerated over the course of 2011, and therefore will carry through into 2012. So, it's not just about our incremental 2012 pricing. Okay, next.

[Patrik Schwendimann:]

Which would mean pricing could be again above 2% in 2012.

[Zürcher Kantonalbank:]

Which would mean pricing could be again above 2% in 2012.

[Roddy Child-Villiers:]

Well, as Jim says, we don’t – I think we didn’t guide on the pricing, but just remember that it's also the last year's pricing has an impact. Okay?

[Patrik Schwendimann:]

But, what about new price increases for 2012.

[Zürcher Kantonalbank:]

But, what about new price increases for 2012.

[James Singh:]

Well, as I said Patrik there is, we expect there is going to be some inflation in cost. We don't necessarily depend only on pricing but wherever we need to take more pricing, I mean, we will and I do not rule out the need to take additional pricing in 2012. But, given where we are today I really can't give you any more specifics on that. But there, if our forecasts on materials are correct there is going to be the need for more pricing in 2012.

[Patrik Schwendimann:]

Right. Thanks a lot, all the best Jim.

[Zürcher Kantonalbank:]

Right. Thanks a lot, all the best Jim.

[James Singh:]

All right Patrik, take care.

[Operator:]

Thank you for your question. Next question comes from Pedro Gil from Santander Bank. Please ask your question.

[Pedro Gil – Santander Bank:]

Good morning and congratulations on the great results. Just a couple of questions, I'm not sure if this was mentioned earlier, any specific guidance as to the input cost inflation outlook as we stand today for 2012, the first question. The second question, any plans to perhaps more aggressively expand Nespresso and the Dolce Gusto Single-Serve concepts in North America? Thank you.

[James Singh:]

Unfortunately, I didn't get your name. Could you repeat your name please?

[Pedro Gil – Santander Bank:]

Pedro Gil with Santander Banking and Markets.

[James Singh:]

Hello Pedro.

[Pedro Gil – Santander Bank:]

Hi, hi there.

[James Singh:]

First of all, we did say earlier that we expect inflation on our raw materials, especially our traded materials will be low single-digit. I can't give you any more specific than that but it's likely going to be below 5%. And that's basically all I could say at this time. Hopefully, we will fine tune those things as the year progresses, but I think that's our expectation around that level. In terms of expansion, yes, Dolce Gusto is now in North America. It's going to be launched in different markets in Latin America and so is Nespresso. I mean, these business models and the innovations are globally oriented, but we take – we implement them as much as we can possibly do and do them well. So the expectations there that these businesses continue to grow global. We're going to add more stores, more Nespresso boutiques around the world in 2012. And Dolce Gusto will go into many more markets, they're being expanded as we speak.

[Pedro Gil – Santander Bank:]

Okay great. Thank you.

[Roddy Child-Villiers:]

Nespresso is, of course, already well established in North America. It's been quite some years now. And has a pretty meaningful presence in number of the bigger cities, but as you will appreciate, we're not pursuing a mass strategy as some of the other players, it is very much a niche super premium business targeted to a particular consumer group.

[Pedro Gil – Santander Bank:]

Great, thanks a lot.

[Operator:]

Thanks for your question. Your next question is from Jane Gelfand from Barclays Capital. Please ask your question.

[Jane Gelfand – Barclays Capital, Inc.:]

Hi, good morning Jim and Roddy. Two quick questions. First, in the nine-month results, you referenced some signs of competitive price pressure in Water. And in today’s release we also see reference to the intensified competition. It's not necessarily surprising given the macro conditions around the world. But I was just wondering whether you can comment on – if you're seeing signs of competitors actually decreasing prices or, in light of the expectation of lower inflation, starting to push more in the promotional lever? Finally, just a small kind of housekeeping question, you mentioned that margins in Zone AOA will be somewhat subdued given the addition of Yinlu and Hsu Fu Chi. So how much can we expect that to move into 2012 given their inclusion? Thank you very much.

[James Singh:]

Thank you, Jane. The nine months – yeah, comments on your question on Waters. I think Waters in general, the pricing remains very competitive. We are seeing a periodic deep discounting in different areas. But what is driving our performance is Nestlé Pure Life, which is a PPP product, good price for good value. And our global brands, Perrier, San Pellegrino, these brands continue to do very well. So we do not expect the pricing pressure will ease up, but I must say that over the last four months or so, we’re seeing some of our competitors taking some pricing. But I do not forecast any letting up of the competitive pricing pressure especially in the developed markets. Your question on house – yeah, we said that at the time when we made these relationships, when we entered these partnerships that there would be a slight 18 negative margin impact on these acquisitions. I don’t want to give you the guidance by region, but I would say globally it’s going to be about 10 basis points. And this is something we’ll have to manage.

[Jane Gelfand – Barclays Capital:]

Perfect, thank you very much.

[Operator:]

Thank you for your question. Your next question is from Jeremy Fialko, Redburn. Please ask your question.

[Jeremy Fialko – Redburn Partners LLP:]

Good morning. I’ve got a question on the kind of restructuring and the litigation line of your P&L. So obviously, you had very low restructuring in 2011 and you’re guiding for that to be around 40 basis points or so in 2012. But you’re implying that these litigation onerous contract lines should be much lower than it was this year. I just wanted you to basically confirm that that’s the case. Thank you.

[James Singh:]

Thank you, Jeremy. First of all, restructuring, as I said, 2010 we made significant restructuring provisions because of the plans we have. And this year, we didn’t make significant additional provisions because, this year being last year, we didn’t make additional significant provisions, because we are executing those programs for which we had provided. And that is why we said, into the future, we believe that restructuring and similar activities would be around 40 basis points. On the litigations, no, what we said that the litigations after last year is now back to the normal level. That is what we said. We didn’t say it will go down or go up, but relative to last year where we had slightly higher provision. This year it’s back to the normal level.

[Jeremy Fialko – Redburn Partners LLP:]

All right. So you’re still going to be in those kinds of few hundred million CHF 300 million is what you say the normal levels of that item.

[James Singh:]

I would think so, yes.

[Jeremy Fialko – Redburn Partners LLP:]

Okay, thank you.

[Operator:]

Thank you for your question. Your next question is from Jeff Stent, Exane. Go ahead. Please ask your question.

[Jeff Stent – Exane BNP Paribas:]

Good morning. Just the quick technicality, on the margin guidance, you’re not guiding to improvement in constant trading margin and are you still guiding to an improvement in constant underlying margins? That’s the first question and secondly, will you still be reporting in the financial statements, the net other trading income expense included in trading operating profit in 2012? Thanks.

[James Singh:]

Could you repeat the last question please? I didn’t necessarily get that.

[Jeff Stent – Exane BNP Paribas:]

Okay. In the financial statement, Jim, when you go through 2012, will you still be sort of breaking out the net other the trading income expense items that you are including in the trading operating profit?

[James Singh:]

Yeah. So let me go back to your first question, last year in February, we introduced you to the new refresh Nestle model where we changed our sales recognition to net-net sales and we said that our margins will be now at a trading operating margin and that’s our guidance. The guidance we’re giving for 2012 is organic growth at the top line based to net sales as we have reported this year and trading operating profit. On the next question, yes, we will continue to give you the breakout of the order trading income and expense.

[Jeff Stent – Exane BNP Paribas:]

Okay. And just to confirm then, so you're not committing any more to an improvement in underlying constant margins?

[James Singh:]

We are giving guidance at the trading operating profit level.

[Jeff Stent – Exane BNP Paribas:]

Okay, much clear. Thank, Jim.

[James Singh:]

Thanks.

[Roddy Child – Villiers:]

What we've done is we have also added the underlying earnings per share at constant currency as part of the Nestlé Model. So it's organic growth, trading operating profit margin and underlying earnings per share at constant currency.

[Jeff Stent – Exane BNP Paribas:]

Okay. Thanks Roddy.

[Roddy Child – Villiers:]

Thanks.

[Operator:]

Thank you for your question. Your next question is from Marco Gulpers, ING. Please ask your question.

[Marco Gulpers – ING Financial Markets:]

Yes, good morning Jim, good morning Roddy. Two questions. First, could you elaborate a bit further on those Billionaire Brands that are basically performing below zero, and Stouffer's, Hot Pockets, Dreyer's and Lean Cuisine? But especially in a market context, are you losing or are you gaining market share? The second is on PPP, could you elaborate again on what the growth was in 2011? I missed that.

[James Singh:]

Okay. Thanks, Marco. I wonder why you start at the bottom of the chart. We you should start at the top of the chart with Nespresso, I think. But anyhow, I'll answer your question. I think as we've said during the course of last year that the frozen categories in the U.S. have been depressed, not growing and in some cases declining. And with innovations we have been able to hold our competitive positions. We have maintained share in Lean Cuisine for example. Pizza business is doing very well and gaining share. But our frozen prepared meals business, that is where – especially on the Stouffer’s side, where that the category and our business within it is severely constrained. We believe we have plans in place to hopefully make that better this year. But during the last two years, that category has suffered because of the very difficult economic environment in the U.S. And the same thing for Ice Cream, in Ice Cream I think we've done reasonably well to hold our leadership positions and especially our novelty businesses and our super premium businesses continue to do well there. Now on PPP, our growth is between 14% and 15%; we did report it in our schedule. And it continues to do well, not only in the emerging markets, but here in Europe we have high single-digit growth in PPP. So, it is a model for emerging consumers globally, it’s not only a model for the emerging markets. And so we have high hopes of that continuing to grow on a global basis.

[Marco Gulpers – ING Financial Markets:]

Maybe a small follow-up question, Jim, Roddy. On Nutrition, your peer has reported to become a bit more aggressive in the weaning food side of things. What are your plans actually for the coming year in terms of weaning food? What are your expectations there? Thank you.

[Roddy Child-Villiers:]

Well, just on the previous question, just kind of remind you that on the Billionaire Brands, Dreyer's [is anywhere referring] to Dreyer's brand not to the total Dreyer's business. And the Dreyer's brand, which obviously competes quite significantly in the premium, or in European parlance mass category, was down. But equally, we had some highlights, Häagen Dazs up 10% in bars, about 7% overall, and some of the other snacks and cones also doing mid to high single-digit growth. Then on the weaning business, I mean, we've had very strong performance in emerging markets, double digit. The plan is what it was in 2011, which is to continue to roll out the new innovations that we've got there. I don't think that anything will change for someone else’s ambitions. We got a very strong innovation pipeline; we're rolling it out across multiple markets. I mean, literally thousands of markets very rapidly.

[Marco Gulpers – ING Financial Markets:]

Thank you very much. And Jim have some good times later. Thank you.

[James Singh:]

Thank you, Marco.

[Operator:]

Thank you for your question. There are no more questions in the queue. I will hand you over to Mr. Singh.

[James Singh:]

First of all, I’m sure I’ll see many of you in the coming weeks in Europe as we go through the opportunity. But I want to take this time to say, thank you for the relationship over the last four to five years, which has become reasonably intense, but always very productive, always very friendly, and respectful, and I am truly grateful for your engagement and your interest in our company, and the support you have given me through your questions, through your challenge, and through your openness. It has been a good journey and I want to thank you for your support. We’re going to see most of you hopefully in London and on the road shows in the coming weeks, both in the U.S. and here in Europe. So thanks again. Our press conference starts at 10 am Swiss time. If you’re interested to listen, it’s webcast. So, thanks again.